CAMBRIDGE – I was in Beijing last month when the Chinese government released a preliminary summary of its 13th Five-Year Plan. This is an important document for understanding where China is headed in the 2016-2020 period. And yet China’s five-year plans just aren’t what they used to be.
The Chinese economy is no longer the state-owned and state-managed system that it was when I first visited more than 30 years ago. In those days, there was no private enterprise, and it was illegal for anyone but the government or a state-owned enterprise to hire an employee. Today, only 20% of employees in China work for SOEs. The rest of the Chinese economy is dynamic, decentralized, and privately owned. American multinational companies and other foreign firms are an important part of the economic scene.
So the five-year plan is no longer a detailed blueprint for industrial expansion; rather, it provides a picture of what the Chinese leadership hopes will be achieved under the government’s general guidance. The aim is to improve the overall standard of living – achieving moderately strong growth, raising the share of consumption in GDP, and improving air and water quality – through a combination of Western-style monetary and fiscal policies, state-financed infrastructure development, and changes in environmental and other regulations.
One of the key goals was set back in 2010: doubling real GDP and real personal incomes by 2020. The government now officially estimates that achieving this target will require average annual GDP growth of 6.5% over the next five years. Given that China is still a relatively poor country, with per capita GDP only about 25% of the level in the United States, maintaining such a rapid pace of growth certainly is not impossible.